Ex-Enron Broadband exec pleads guilty to wire fraud

Fraudulent marketing added to the long list of crimes of disgraced Enron employees.

You can add fraudulently marketing its broadband services to Enron's lengthy list of crimes.

The US Justice Department announced Tuesday that Joseph Hirko, the former co-CEO of Enron Broadband services, has pleaded guilty to one count of wire fraud before the US District Court in Houston. Under a plea agreement reached between Hirko and the court, the former Enron executive will face a sentence of up to 16 months in prison and will have to pay a fine up to US$250,000. Additionally, Hirko has pledged to fully cooperate with the government's continued criminal investigation of Enron Broadband Services and to forfeit roughly US$8.7 million in restitution to former investors through the SEC's Enron Fair Fund.

Essentially, Hirko has pleaded guilty to falsely representing Enron Broadband's progress in deploying and activating its broadband operating system back in 2000. Hirko had participated in an analyst conference in which former Enron CEO Jeff Skilling had announced that Enron Broadband Services had developed a broadband operating system that would offer "dynamic routing" to automatically deliver data through the most optimal routes on Enron's network. On May 15, 2000, Enron issued a press release that falsely implied that the broadband operating system was up and running on Enron's network. According to the plea agreement, Hirko approved of the language contained in the press release even though he knew it contained false statements of the system's status. The goal of these false statements, say federal officials, was to keep Enron's stock price high and to improperly boost Hirko's holdings.

"Mr. Hirko not only deceived his colleagues and investors about Enron's 'core' broadband unit, but his actions had a greater impact on our nation's economy and resulted in the eventual erosion of numerous retirement nest eggs," said Assistant Director Kenneth W. Kaiser, FBI Criminal Investigative Division.

Hirko and other Enron Broadband officials were originally tried on several charges, including securities and wire fraud, in 2005. After a mistrial, however, Hirko was charged in a new indictment with wire fraud, securities fraud and insider trading.

Last year, former Enron Broadband CEO Kenneth Rice was sentenced to 27 months in prison on securities fraud charges and ordered to turn over US$15 million to be distributed to former Enron investors. After Enron filed for bankruptcy in December 2001, several investigations revealed that the company had engaged in widespread accounting fraud.

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Brad Reed

Network World
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